RSI - indicator for MT 4


The Relative Strength Index technical indicator (RSI) is a price-following oscillator which ranges between 0 and 100. When Wilder introduced the Relative Strength Index, he recommended to use a 14-day RSI. From then on, the 9-day and 25-day Relative Strength Index indicators have also gained popularity.

 

A well-known method of analyzing the RSI is to search for a divergence in that the security is making a new high but the RSI is failing to exceed its previous high. This divergence is a sign of an impending reversal. If the Relative Strength Index then turns down and falls below its most recent trough, we are talking about a completed "failure swing". The failure swing is treated as a confirmation of the impending reversal.

 

There exist different ways to use Relative Strength Index for the chart analysis:

  • Tops and bottoms: The RSI normally tops above 70 and bottoms below 30. It normally forms these tops and bottoms before the underlying price chart;
  • Chart Formations: The RSI often forms chart patterns like head and shoulders or triangles which may or may not be visible on the price chart;
  • Failure swing (Support or Resistance penetrations or breakouts): This is the situation when the RSI surpasses a previous high (peak) or falls below a recent low (trough);
  • Support and Resistance Levels: The RSI Shows - sometimes more clearly than the market price itself - levels of support and resistance.
  • Divergences: As discussed above, divergences develop if the price makes a new high or low which is not confirmed by a new high or low in the RSI. The market price normally corrects and moves in the direction of the RSI.

You can download the RSI indicator here: https://www.mql5.com/en/code/47